President Joe Biden’s administration warned again on Sunday of “catastrophic” consequences for the US economy if the country defaults, as negotiations with Republicans over a debt deal are expected to resume next week.
Alarm bells are ringing about the possibility of the first US default, with uncertainty over the actual date when the government will stop paying its bills.
Congressional Republicans have been calling for budget cuts in return for raising the so-called debt ceiling, while the White House has insisted for months that the nation’s credit should not be up for negotiation.
The two sides remained at loggerheads despite weeks of warnings from government officials and bankers that default could lead to dire consequences, including a possible recession and possible global financial contagion.
Treasury Secretary Janet Yellen warned that a default could happen by June 1, while the nonpartisan Congressional Budget Office on Friday projected a June 15 date.
“We shouldn’t be here,” Deputy Treasury Secretary Wally Adeyou said Sunday on CNN’s “State of the Union.”
He warned that “If Congress fails to raise the debt limit by the time of default, we will go into a recession and it will be disastrous.”
“The USA has never defaulted on its debt – and we can’t.”
Biden has stated he wants a “clean” increase in the debt ceiling, but Republicans insist that any extension of the country’s borrowing authority, which currently stands at $31.4 trillion, comes with significant spending limits.
“It’s time to get spending levels back to pre-Covid, and then we can talk about raising the debt ceiling,” Byron Donalds, a Republican from Florida, told FOX News Sunday.
“If Joe Biden brings nothing to the table, if all he does is sit there with his hands in his pockets…he is leading our nation into default.”
Former President Donald Trump encouraged Republican lawmakers to hold out if Biden does not agree to “massive cuts.”
– Constructive negotiations –
A long-awaited new round of debt-ceiling talks between Biden and Republican leaders, including House Speaker Kevin McCarthy, has been delayed until next week.
Adeyou acknowledged that “constructive” negotiations were underway at the staff level, while dismissing assurances that Biden did not want to address the ballooning US debt.
“The president has laid out a plan that includes $3 trillion in debt relief over 10 years,” Adeyou said, referring to Biden’s budget request unveiled in March, which included tax hikes for the wealthy and corporations.
Congressional leaders must address ways to strike a deal on fiscal policy, “but since we’re having this conversation, there’s no reason we can’t raise the debt limit and prevent defaults in this country, a default that could lead to a massive recession that will cost us millions of jobs.” .
Lyle Brainard, director of the National Economic Council at the White House, confirmed that an agreement would be reached.
“We expect that Congress will do what is necessary” to avoid a default, Brainard, the former vice chairman of the Federal Reserve, told CBS Sunday on “Face the Nation.”
Biden took up the issue Saturday in Delaware, where he spoke briefly with reporters.
“They are moving forward,” he said of the talks. But, he added, while there was a “real discussion,” the two sides “have not yet had a conversation.”
(Except for the headline, this story was not edited by the NDTV staff and was published from a syndicated feed.)
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